CHAPTER 8 EXPATRIATE COMPENSATION AND TAX REIMBURSEMENT POLICIES Most U.S. companies sending U.S. citizens and resident aliens abroad have compensation policies designed to ensure these employees receive total compensation that will provide for a standard of living comparable to what they would have had if they were still living and working in the U.S. Such compensation policies take into account the additional costs of living abroad, including income taxes. ELEMENTS OF COMPENSATION FOR EXPATRIATES To offset the expense and/or inconvenience of a foreign assignment, most companies offer their expatriates one or more of the following additions to the basic compensation package: * Housing expenses-a housing allowance or payment or reimbursement of actual housing expenses to purchase or rent housing comparable to what the expatriate occupied in the U.S. The allowance or reimbursement may also cover the employee's cost of maintaining his or her home in the U.S. while working abroad. An alternative to the allowance or reimbursement is company-provided housing in the foreign country. * Cost of living allowance (also called a "goods and services allowance")-payments to make up for the higher costs of living in the particular foreign country than in the U.S., based on tables issued by the U.S. Department of State or private firms. This allowance takes into account inflation rates and fluctuations in the exchange rate between the U.S. and the foreign country. * Moving expenses-relocation expense payment or reimbursement to cover the cost of moving to the foreign country. For a discussion of special tax rules that apply to moving expense reimbursements, see page 6-13. * Tax reimbursements-reimbursement under a tax protection or tax equalization plan (described later) to cover any additional U.S. and foreign tax costs from working abroad. 8-1